Montreal

No, Montreal Real Estate Is Not The Next Vancouver or Toronto. Here’s Why

No, Montreal Real Estate Is Not The Next Vancouver or Toronto. Here’s Why

Montreal real estate isn’t hot, and it’s not being driven by foreign buyers fleeing Toronto and Vancouver. There’s significant media coverage on how Montreal is the new real estate hot spot, especially in the luxury segment. It’s certainly attention grabbing, so we pulled some sales data from the Canadian Real Estate Association (CREA) and the Greater Montreal Real Estate Board (GMREB). Turns out Greater Montreal real estate is doing okay, but to say it’s booming is a bold faced lie.

Prices Are Up A Whopping $200… Yeah, You Read That Right

The price of a home in Montreal is getting more expensive, but it’s not climbing all that high. The benchmark price, which is the price of a typical home, rose to $326,400. That’s up a whopping 0.06% from the month before, which works out to $200. Compared to same month the year before, this price is 4.64% ($14,500) higher. To contrast, the annual benchmark price increase for all Canadian urban centres was 11.24%.  Montreal had a good climb, but it’s underperforming the national composite.

Better Dwelling, Source: CREA.

The average sale price showed even more conservative gains. The average home in Greater Montreal sold for $374,333, a 4.1% increase from the same month last year. Once again, it’s a healthy market –  but only a notch above inflation.

Better Dwelling, Source: CREA.

Montreal’s Luxury Market Is Not Booming

This is the interesting part, agents have been boasting of a boom in luxury buying. The number they use is above $1 million, so let’s look at the number of sales in that price range. August saw 64 sales above a million dollars, compared to 59 the same month last year. This is 8% growth, a touch under the 8.1% growth of all sales in the region. Sales over $1 million accounted for 2.2% of all Montreal sales. This isn’t a huge portion of sales, nor is it huge growth – regardless of how agents manipulate that statistic.

Better Dwelling, Source: GMREB.

To contrast, let’s look at Toronto luxury sales – which are generally over $2 million. The number of sales in August above $2 million were 132, roughly 4.8% of the market. If we tallied up the number of sales over a million in Toronto, that number would shoot up to 15%. August was also a bad month for detached sales in Toronto.

Toronto’s Foreign Buyers Don’t Make Sense In Montreal

News outlets are reporting that foreign buyers are driving Montreal’s “huge” gains. There’s two major types of foreign buyers – immigrants, and urban land bankers. Toronto primarily has the first one, the kind that are immigrating. Toronto Real Estate Board (TREB) statistics show 91.5% of the city’s foreign buyers bought their home to occupy. TREB also found the majority of these buyers were moving from the United States. You know, because Toronto is a global financial center.

A good number of Toronto’s foreign buyers move there for things like employment. A tax does not change employment opportunities overnight, or send jobs elsewhere. Foreign buying of condo pre-sale assignments remain, but they aren’t taxed anyway. A non-resident tax is applied when the land registers, so they can still buy and flip it tax free. Point is, a tax doesn’t send people moving for jobs to another city. It likely delays the buy, until it’s clear to the new resident that they don’t have to pay it.

Vancouver’s Foreign Buyers Don’t Make Sense In Montreal

There’s a lot of immigration to Vancouver, but the real problem are buyers using homes as a store of wealth. See, Vancouver is a very special place where global real estate buyers use homes as an inflation sensitive hedge. An inflation sensitive hedge, for those that don’t know, is a commodity bought to preserve capital when asset inflation goes out of control. This is something that took trillions of dollars, and over 30 years to establish.

In Vancouver, these homes aren’t purchased aren’t for living in. You buy them, and sell them when you need money. Just like the gold bars you have stashed away in a Swiss bank account. Census numbers peg the number of vacant, or occasionally occupied homes in Metro Vancouver at a mind boggling 66,719. An analysis we did last fall showed that 1 in 10 homes being resold had never been lived in, as identified by the seller… some for over 20 years. Don’t take my word for it though. The world’s most powerful banker, and Canada’s largest developer have already explained Vancouver real estate is used this way.

The foreign buying tax did dampen Vancouver buying. However, China’s change to currency controls is what slowed new capital from just reappearing. China also deployed a 400,000 person army to make sure they could do it. Cities like Auckland, and London are seeing a reduction in Mainland Chinese buying without a tax. Montreal doesn’t have a magic exemption.

Vancouver’s foreign buyers aren’t going to set up a new banking capital overnight. The slow capital build up in the city means home prices don’t just drop. This value retention is what continues to make it attractive. They would sooner find loopholes in the tax, than spend another 30 years turning Montreal into a new bank. These are after all, long-term deposits. They last through many, many governments – and taxes.

Narrative Crafting Is Hitting Montreal

Montreal real estate is performing just a notch above inflation, which is where it should be. However, the city’s real estate industry is flashing early signs of narrative crafting. This is when the industry uses observations that can’t be proven to drive FOMO from buyers. Buy now, or a mysterious person from the East will lock you out of homeownership in your own city!

Once this fear hits, domestic speculators will start driving prices – attracting global speculators. This is when it turns from a healthy market, to a speculative one. They’ll play against each other, until growth tapers. They leave as quickly as they come, and locals are usually left with nothing more than a pile of debt.

Next week we’ll try to publish a pricing model for Montreal. I do think prices will go higher in the city, but not for the reasons most people think it will.

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11 Comments

  • Reply
    Bay Street Guy 4 weeks ago

    Montreal agents will gerrymander sales numbers to include 2016, which was the great Canadian low interest buying spree. Most people don’t realize that China’s capital controls killed it overnight. Even the highly optimistic (because it’s their business) Juwai revised their numbers down by over 20%.

    2016 was a one time even, and Canadians should be happy if it didn’t happen to them. Greedy d-bags will try to say it’s there turn, but a slow climb will ensure that homeowners won’t be left with a flash crash, wiping out generations of savings.

    As always, great article and insights, Stephen. Good introduction, and I hope you go a little deeper into Montreal sales numbers. Journalists are doing a pretty sloppy job these days.

    • Reply
      Jack 4 weeks ago

      Living in Montreal, and being on the fringe of buying a house, we have a large down payment that would take out the lions share of the price and limit the need for a mortgage. The problem for me is the price for a 100 year old house requiring a new foundation, pushes the house into the 900k zone with a tiny yard and no driveway.

      This is hard saved money, and my issue with putting that much money into a house, is wouldnt that money better be served earning interest in the market instead of being tied up into a fixer upper which will bleed money for the life of ownership, and will only realize a profit when it’s sold in 40 years? At which point I’ll be near dead a wont be able to enjoy that money. Housing is fools gold, it aint worth squat as long as you live in the house.

      Anyhow, to address some comments, and the article. I drive through westmount, and there is no doubt chinese buyers are present, with chinese realtors and signs, and not to mention my uncle “in law” sold his house for 5% over asking in a matter of days to a recently immigrated chinese family. They will live in the house however.

      My other uncle “in law” is a pilot, and does shanghai to montreal flights, and says the flights are filled with chinese on the way to montreal, but half empty on the way back. He says, they come to Montreal to buy, although I dont think any of us have any way to confirm that.

      Couillard and Quebec allow chinese to immigrate here when the rest of the country is much more difficult to, making quebec a gateway for foreign investment. Often they then move to Ontario or BC, but the leaky faucet starts in quebec as they make money letting foreigners come in. So Quebec is auctioning off our ability to buy homes for foreign investment. It’s a joke.

      Otherwise I speak to people who own homes, and the consensus is many in their 30’s have stretched themselves thin, and the upcoming rate hikes will sink people. Already many are borrowing from their HELOC to pay their daily expenses. At some point with a little more pressure this dam has to break. It seems to be a house of cards, but Ive been predicting this for a decade, and the prices have only defied my claims. And now CREA and others claim that house prices will never decrease, that downturns wont happen again like they did in the 80’s.

      I really hope this article is in fact true, because I hear and see otherwise. Id like to buy a house, but I see homes as negative value in this market. Im hoping the interest rate increases will push the prices down too.

      • Reply
        Glenn 4 weeks ago

        Also currently looking to buy in Montreal, and I’m seeing the same thing you are. What we have in Montreal isn’t a Chinese are buying houses to leave them empty problem, what we have is an immigration problem. We’re trying to balance the number of refugees we keep receiving, by adding uber rich immigrants.

        On paper, it looks like we’re doing really well. In reality, if you’re a middle class family, you’re being sandwiched by more and more extremes of wealth and poverty. We now have huge neighborhoods that are too rough for anyone but optimistic hipsters, and too wealthy for anyone but the global elite. Opportunity is dying in our city for locals.

        For what it’s worth, this article is the only one I’ve read that didn’t say Montreal was a hot real estate market. It’s also the only one that shows us that prices. In hindsight, I don’t think I’ve ever seen a news report that actually said what the prices were, just that they are up. Disgusting manipulation.

        • Reply
          Jack 4 weeks ago

          Agreed, you see real estate agents constantly talking up the market. I had a mobile mortgage specialist come in last fall, and he said get in now, rates will drop further. In the next breath he tells me he sees so many borrow from their HELOCs, and people cant afford these prices, completely contradicting the rosy picture he was painting. 12 months later, we have 2 rate increases, which completely invalidated his so called “expertise”. All they’re doing is directing us into a lifetime of debt, and no savings. So not only have the boomers benefited from a massive increase in the stock market, but also the real estate. I feel like people under 35 or 40, are being given a hot potato, and we’ll be stuck financing our parents generation as they cash out of their home and we’ll be stuck paying their over inflated home prices, and corresponding crash.

          My friend tried to buy the building he lives in, only to get outbid by a hipster in his 20’s, who works as a barista. He believes his father bought the building for him.

          I really like this site as well, so often news outlets report what the agents say, which as we know often favours their motives for higher volume and commissions. Seems a little backwards to give biased opinions.

          • Beh G. 4 weeks ago

            “…he said get in now, rates will drop further. In the next breath he tells me he sees so many borrow from their HELOCs, and people cant afford these prices”

            That’s pretty much the epitome of a bad/useless industry professional. We noticed the exact same thing with RE agents when we were selling our house in Toronto, in your face contradictory statements left right and center.

            This is why I’m not too sympathetic toward people who have actually listened to these guys/gals and bought something in the last year or two. At the end of the day you need to be at least intelligent enough to pick-up on obvious fallacies.

  • Reply
    Kirsty 4 weeks ago

    Hipsters are eating this up, and using their coffee shop and restaurant wages to buy flats. I just looked over the “numbers” I saw in another article on Montreal real estate , and didn’t even notice they use ridiculous statements that can’t be proven. “Montreal is the next luxury capital” “sales are increasing” …by 5 houses? Give me a break.

  • Reply
    Clark Sold Us Out 4 weeks ago

    Finally, someone that acknowledges that condo pre-sales are still being snatched by foreign buyers. As a local if you want to buy one, you have to buy it flipped from an agent later.

  • Reply
    No, Montreal Real Estate Is Not The Next Vancouver Or Toronto. Here’s Why – Today's News 4 weeks ago

    […] Better Dwelling: Montreal real estate isn’t hot, and it’s not being driven by foreign buyers fleeing Toronto and Vancouver. There’s significant media coverage on how Montreal is the new real estate hot spot, especially in the luxury segment. It’s certainly attention grabbing, so we pulled some sales data from the Canadian Real Estate Association (CREA) and the Greater Montreal Real Estate Board (GMREB). Turns out Greater Montreal real estate is doing okay, but to say it’s booming is a bold faced lie. […]

  • Reply
    Westmount Rhodesian 3 weeks ago

    First-hand experience :

    1. We sold in Old Montreal :buyer is from overseas. Our realtor (a sharp professional indeed) said “70% chance you’ll sell to foreigners and they’ll want furnished”. She was right on both fronts. Prices up 10% on what we could have expected one year ago.

    2. We purchased in Westmount: Multiple bids , top bidder was from mainland China. Our bid only was materialized due to less onerous conditions and timelines for closing (beyond typical financing, inspection etc). Prices in the area are up and up ~10% PA easily. Numerous new rentals ($5, $10k + per month) from properties just purchased. All listing agents are unknowns from unknown brokerages with Chinese calligraphy in their adverts?

    Better Dwelling: perhaps you should be not so dismissive of the trend ? (perhaps in not as great magnitude as Toronto or Vancouver, but a trend nonetheless?). Your readers would appreciate a bit more balanced reporting. The ‘banlieus’ aren’t attractive to hot money but the embers of money laundering are simmering in certain neighbourhoods.

    • Reply
      Mile End hipster 3 weeks ago

      People like you are the problem. With no actual numbers, your anecdotal evidence shows a lot less than prices only increasing by 4%. Like the article says, there’s two foreign buyers – people that live in them, people that don’t.

      People that live in them are regular immigrants. We hand out millionaire visas to mostly wealthy Chinese investors, and give them papers. These are not foreign buyers, and it’s not a trend – but it happens. Even a foreign buyer tax would not stop these people, but this year applications dropped to practically nothing, and they mostly move to BC after they get here. In Vancouver, they call them “astronauts.” The get a visa, but have to work overseas (and leave them empty). That’s the kind of buyer you had, but like I said – there’s less than 100 applicants this year. They can’t “drive” a market in a city this big.

      The kind that doesn’t live in them only appears after markets heat up. They depend on people like you, to stir up emotion around every asian buyer (even Asian-Canadians). This causes regular buyers to start acting irrational, and paying 30% higher on a bungalow like they did in Toronto.

      Even if we get as many foreign buyers as Toronto did, there’s still the other 95% of buyers that need to place a disproportionate amount of wealth into home prices. We don’t live that way in Quebec, we thrive because people don’t property speculate – they start businesses. Over 1.8 million people in the province work for small business. Québécois make productive investments, not passive investments. That is, unless real estate agents convince people being a rentier capitalist is going to be more lucrative than being a productive business.

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